Developing a Franchise System

by Franchize Consultants

last updated 11/12/2020


Think Ahead

by Franchize Consultants

last updated 11/12/2020


Franchize Consultants suggest you start preparing your franchise for 2040

Franchise agreements commonly have a total combined term of 15-20 years. ‘That timeframe provides a rigidity to franchisee and franchisor business models that can’t easily be adapted,’ says Dr Callum Floyd, the Managing Director of Franchize Consultants. ‘Decisions made at the start will influence how a franchise performs for many years to come.’ He offers two examples from New Zealand franchises.

  1. A new franchisor set their royalty at 4 percent when they first started. Today, they have a nationwide network of profitable franchisees but make very little profit themselves. With proper research and planning, they could have set an easily-affordable 5 percent royalty. This would not only have generated an annual profit of around $1 million, but have allowed them to provide more support – boosting profits further for franchisees and franchisor alike.
  2. A franchisor defined and sold 12 exclusive territories to cover New Zealand. Time showed that there was actually scope for more than 100. Proper research would have identified this and allowed the franchise to achieve greater market penetration. In turn, that would have generated more buying power, more awareness, and helped drive stronger franchisee and franchisor returns

‘These examples show that franchising is a complex process,’ says Callum. ‘Optimising long-term value requires a much more considered approach than most companies realise – and many consultants can provide.’

Franchize Consultants is a six-times winner of the Service Provider of the Year title in the Westpac New Zealand Franchise Awards. ‘Thirty years of experience have given us a wealth of understanding about structuring franchises in all sorts of industries. We not only help new companies design franchise networks; we also review franchise models for existing companies to help them improve performance.’

New franchisors

If you are considering franchising a business, Callum suggests thinking ahead to 2040 and conducting as detailed planning as practicable to create a strong foundation for future returns. Key areas include:

  • Detailed franchising feasibility and implementation planning, including fee structures, ways of generating revenue, support costs and territories;
  • Franchise agreement and disclosure document development;
  • Franchisee and franchisor operating manuals;
  • Franchisee recruitment process and infrastructure;
  • Support office team preparations.

Established franchisors

Established franchisors also need to look to the long term to give them perspective on changes needed now to secure a more certain, sustainable and rewarding future. These might include:

  • A comprehensive review of performance, structure and management, at both the franchisor and franchisee level;
  • Current and expected changes affecting customers, marketing, supplies, technology and competition;
  • Best practice, legal and other environmental forces;
  • Franchisor vs franchisee responsibilities;
  • Fee structures and support services.

‘A comprehensive assessment of gaps, threats, and opportunities in all these areas allows you to identify goals and strategies for the benefit of all stakeholders,’ says Callum. ‘Expert guidance can help you harness the potential and value from your franchise business – contact Franchize Consultants to find out how we can help.’   

See this advertorial on page 52 of Franchise New Zealand magazine Year 29 Issue 3

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